INVESTOR PRESENTATION - AWS
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Forward-looking statements Certain information in this presentation, including statements relating to winning shelf space, cross-selling our brands through our global distribution platform, extending our international reach, delivering on our growth plan, increasing sales and profitability in the future, and our financial guidance for Fiscal 2019 and Fiscal 2020, constitutes forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “is positioned”, “estimates”, “intends”, “assumes”, “anticipates” or “does not anticipate” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events. Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by MAV Beauty Brands as of the date of this presentation, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in greater detail in the “Risk Factors” section of the Annual Information Form, which is available at www.sedar.com. These factors are not intended to represent a complete list of the factors that could affect MAV Beauty Brands; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this presentation are made as of the date of this presentation, and MAV Beauty Brands expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law. If any such risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in those forward-looking information. Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this presentation represents our expectations as of the date of this presentation (or as the date they are otherwise stated to be made), and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws. Non-IFRS Measures This presentation makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures including “Adjusted EBITDA”, “Adjusted Net Income” and “Adjusted Gross Profit”. These non-IFRS measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation. Definitions and reconciliations of non-IFRS measures to the relevant reported measures can be found in the Company’s MD&A dated March 28, 2019 and in Appendix “A” to this presentation. To assist readers in assessing year-over-year performance, we have included selected pro forma financial information in this presentation. Pro forma financial information gives effect (as if they occurred on January 1, 2017) to: (i) the acquisition of Renpure, LLC; (ii) the entry into the Company’s new credit facility and the re-payment of the Company’s prior indebtedness; and (iii) the completion of the Company’s initial public offering and concurrent changes to the share capital. Certain Other Matters Unless otherwise stated herein, financial information in this presentation is presented in United States dollars. MAV Beauty Brands 2
About MAV Growth Financial Beauty Brands Strategies Overview 01 02 03 01 About MAV Beauty Brands MAV Beauty Brands 3
Senior leadership Marc Anthony Venere Tim Bunch Chris Doyle Founder, President & CEO Chief Revenue Officer Chief Strategy Officer 25+ years experience 15+ years experience 25+ years experience 2016 Ontario Winner WORLD CHAMPION & CELEBRITYHAIRSTYLIST MAV Beauty Brands 4
How we got here Acquired 2018 2017 Renpure is 2016 founded by the Redmond family IPO The original Marc Anthony Salon opens Cake Beauty is 2008 in the very location founded by where his father Heather Reier practiced the craft Marc Anthony launches nationally Partnered with TA across the U.S. in 2003 Associates, highly Substantial increase in Ulta Beauty and experienced growth C-level executives and Marc launches CVS 2002 private equity firm value-add Board members his first product: Marc Anthony “Marc Anthony products sell Implemented processes to International” internationally, support innovation, new beginning in product development and 1998 Europe operations Robust KPI reporting and forecasting 1995 LATE 90’S implemented Marc begins working First SKU National launch at with A-list celebrities launched at 1993 Shoppers and appearing on Shoppers Drug Mart national TV shows Drug Mart MAV Beauty Brands 5
3 100+ major retailers fast-growing hair and body care brands Building an iconic, multi-brand, fast-growing global personal care company $103mm 42% 2018 pro forma revenue(1) Q4 2018 pro forma revenue growth(1) 1) Pro forma for ownership of Renpure as of January 1, 2017 and includes Cake Beauty as of January 23, 2018. MAV Beauty Brands 6
2018: a transformative year for MAV Beauty Brands strategic priorities 2018 progress and results Organic growth MAV Beauty Brands: Broke into top 10 U.S. haircare companies and is the fastest growing Marc Anthony: Fastest growing hair care brand in the U.S. Drug channel Renpure: 20% YoY POS growth in U.S. FDM Cake: Accelerated same-sku sales with new pricing strategy Cross-selling Cake launched in two major U.S. drug retailers and in South Africa and Mexico Renpure launched in Canada’s largest drug retailer Whitespace expansion Expanded into 10 new international countries Expanded Marc Anthony into U.S. Dollar Store and Beauty Supply Innovation Marc Anthony innovation made significant impact with retailers and media Introduced Renpure Plant Based Beauty collections Cake innovation accelerated in Hair, Body, Skin and Cosmetics for mid-2019 and 2020 Organizational development Filled out leadership team with VP Ops, VP Marketing, VP Data & Analytics, VP Finance, Director Finance Appointed Judy Adam as new CFO and Chris Doyle as Chief Strategy Officer (April 2019) Operations Initiated COGs reduction program and re-balancing of manufacturers that will result in significant 2019 and 2020 gross margin improvement MAV Beauty Brands 7
Pioneering the Masstige category SALON & SALON-DIVERTED PRODUCTS Masstige products Retailers allocate provide a strong MASSTIGE more shelf space PRODUCTS to products that value proposition for consumers $4.00 - $12.00 generate better economics “Since our beginning in 1995, our mission has been to deliver premium quality products that TRADITIONAL are accessible to and convenient MASS MARKET PRODUCTS for consumers.” MAV Beauty Brands 8
Complementary high-growth portfolio of Masstige brands Modern, salon-inspired brand that Plant-based, naturally-inspired products that Lifestyle brand that provides a fun, consumers trust to solve their unique don’t sacrifice performance or affordability vibrant and rich sensorial experience hair concerns 185 SKUs across 21 collections 172 SKUs across 9 collections 63 SKUs across 3 collections Positioned to address a variety of consumers, industry trends and retailer needs with limited competitive overlap MAV Beauty Brands 9
We have strong and collaborative retail and distribution partners North American Retail Partners(1) Leading International Distributors Direct, longstanding and collaborative relationships with major North American retailers Distributors have strong relationships with major retailers in attractive international markets Add significant value by acting as local salesforce 30+ countries CHANNEL SELECT RETAIL PARTNERS DRUG MASS CVS, Rite-Aid, Shoppers Drug Mart, Walgreens Target, Walmart 100+ retailers FOOD HEB, Kroger, Loblaws CLUB SPECIALTY Costco Ulta Beauty Dollar General, Family Dollar 60k+ DOLLAR doors OFF PRICE Burlington, Ross, TJX Countries outside North America where MAV Beauty Brands currently has a presence Highly diversified across retailers, brands and geographies 1) North America means Canada and the United States. MAV Beauty Brands 11
We are in large and growing categories of a global market (US$ Billions) MASSIVE GLOBAL MARKET R E S I L I E N T & R E C E S S I O N - R E S I S TA N T BODY CARE(1) ◼ GLOBAL RETAIL SALES VALUE 35.4% ◆ YOY RETAIL SALES GROWTH CAGR: BABY 3.8% PRODUCTS(2) 3.5% 14.0% $73 $75 $80 $69 $71 $66 $70 HAIR 12.0% $63 ORAL CARE 9.5% $465B CARE 16.2% 10.0% $45 $46 $48 $50 $53 $54 $55 $58 $60 $60 $50 8.0% 5.2% 5.0% 4.8% $40 4.5% 4.4% 4.4% 4.2% 3.9% 6.0% 3.3% 3.3% 2.9% $30 2.8% FRAGRANCES 2.4% 2.4% 10.6% 4.0% COLOUR $20 COSMETICS 2.0% $10 MEN'S GROOMING 14.2% 10.7% 0.0% $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Strategically positioned in highly attractive end markets Source: Euromonitor International, Beauty and Personal Care 2018 Edition. 1) As per Euromonitor International’s Skin Care and Bath & Shower definitions. 2) As per Euromonitor International’s Baby and Child Specific definitions. MAV Beauty Brands 12
We are aligned with key growth trends Millennials spend disproportionally high amounts on beauty & Growing demand for personal care natural personal care Increasing popularity of authentic, products +30% Strong consumer demand for higher independently- founded brands +10% 4-year CAGR of the global Anticipated increase in millennials’ share of the total U.S. retail expenditure by 2020P(3) quality products that are convenient SHIFTING AWAY FROM SALON PROFESSIONAL +22% 3-year CAGR of independently- natural and organic personal care products market(2) founded brands (excluding brands MASSTIGE that were acquired >3 years ago)(1) TRADING UP FROM TRADITIONAL MASS 01 02 03 04 1) Includes Hask, Marc Anthony, Maui Moisture, Not Your Mother’s, OGX, Renpure and Shea Moisture; U.S. retail sales data per Nielsen downloaded May 2018 (3-year CAGR from Q1 2015 - Q1 2018). 2) Source: Persistence Market Research – Global natural & organic personal care market, 2018 report purchased in April 2018. 3) Source: U.S. Census Bureau and Fung Global Retail & Technology. MAV Beauty Brands 13
We innovate better than our competitors Product Ideas Integrated Product Development • Beauty experts • Management’s extensive industry experience • Founder-led innovation • R&D team • Collaboration with retail partners • Internal creative resources • Bi-annual innovation summit Consumer & Retailer Feedback & Flexible Supply Chain Quick & Nimble Validation • Collaborative and longstanding relationships Innovation Cycle • Collaborative and active dialogue with retail with diverse group of suppliers partners provides opportunity to react to feedback • Asset-light business model allows us to be more in midst of buying cycle nimble, driving industry-leading speed-to-market • Products often launched at strategic retail partners • Efficient operations before mainstream launch Ability to consistently deliver fast and highly successful new product launches MAV Beauty Brands 14
Innovation in action New product ideas: Retailer feedback: Continued product innovation Speed to market S T R I C T LY C U R L S C O L L E C T I O N RENPURE BODY WASH • Recognized significant unmet demand for products to style curly hair in • We were asked by a U.S. retailer in July 2017 to provide a body wash the early 2000s • Using our in-house chemist, we developed and presented body wash • Launched nationally in Canada and the U.S. primarily as a styling options to the buyer one month later, from which two formulas were product in 2001 chosen to launch in January 2018 • Strictly Curls has been on the shelf since 2001 and continues to grow • Ultimately shipped four body wash SKUs in January 2018, less than six significantly in excess of the broader market months after meeting the body wash buyer • Continued product innovation, through new products and packaging, • Our body wash SKUs have been extremely successful and buyer has has resulted in a loyal consumer following expanded the line MAV Beauty Brands 15
We invest and activate in-store In-Store Promotions Endcaps Holiday Bonus Pack Most purchase decisions are made at shelf Collaborative, partnership approach with retailers Enables real-time performance and ROI measurement MAV Beauty Brands 16
We use efficient channels that build community Marc Anthony Stylist Squad Public Relations Social Media Elevate the connection between products, Established relationships with key Create content that generates salon quality and the consumer experience digital, print and televised media education and entertainment $7.3mm earned media value(1) Industry Events Consumer Engagement Micro-influencers Create branded experiences that capture Foster a dialogue with our consumers in order We work with hundreds of high performing micro-influencers who attention and spikes up conversation to keep them excited about our brands endorse our products to targeted consumer groups 1) For the year to date ended Dec 31, 2018. MAV Beauty Brands 17
Our model is working +56% POS growth for Marc Anthony #1 True Professional Fastest-growing brand in U.S. drug channel +20% POS growth for Renpure (Marc Anthony True Professional) Source: Nielsen AOD, BC SUPER CATEGORY: HAIR CARE – Total US – OND 18 (W/E 12/29/2018) MAV Beauty Brands 18
About MAV Growth Financial Beauty Brands Strategies Overview 01 02 03 02 Growth Strategies MAV Beauty Brands 19
Business model provides visibility and stability Retail Distribution Illustrative Retail Partner Planogram NEW INNOVATIONS BYE BYE $ NUMBER OF FRIZZ STORES (DOORS) BYE BYE FRIZZ GROW LONG SHELF SPACE TOTAL x = POINTS OF DISTRIBUTION x VELOCITY = REVENUE GROW LONG GROW LONG COCONUT (PODS) COCONUT COCONUT FACINGS PER COCONUT STORE (SKUS) STRICTLY CURLS STRICTLY CURLS STRICTLY CURLS STRICTLY CURLS STRICTLY CURLS TIME MAV Beauty Brands 20
Multiple levers for continued growth 01 Incremental sales of existing brands to existing partners U . S . T O T A L D I S T R I B U T I O N P O I N T S (1) 02 CANADIAN Cross-selling our complementary brand portfolio U.S. 03 Extending our reach into new international markets R E TA I L E R S R E TA I L E R S 26 total retailers 47 total retailers 36 30+ Countries today 3,322 39 Target countries with Q1 2018A AVERAGE OF TOP 10 HAIR CARE BRANDS(2) hair care sales of 17 ≥US$100+ million(3) 11 9 488 MAV BEAUTY BRANDS Q1 2018A Ability to introduce ONE new brand 10 New markets in 2018 Ability to introduce TWO new brands 1) U.S. Nielsen downloaded May 2018. Based on the Brand High Total Distribution Points (“TDP”) of the Marc Anthony and Renpure namesake brands as at March 31, 2018. TDP is an approximate measurement of the distribution of a brand (or ‘‘product aggregate’’) while taking into account the number of retail locations and Universal Product Codes, or UPCs, selling within that brand or aggregate; the calculation is the sum of % ACV across UPCs. The Company believes that this metric provides a relative indication of retail penetration factoring in both distribution breadth and distribution depth. 2) Top 10 hair care brands include L'Oréal, Garnier, TRESemmé, Pantene, Suave, Head & Shoulders, OGX, Dove, Conair and Herbal Essences. 3) Euromonitor International, Beauty and Personal Care 2018 Edition. MAV Beauty Brands 21
Incremental opportunities beyond current outlook 01 Entering new or adjacent high-growth categories 02 Strategically acquiring complementary businesses 03 Expanding our distribution to new retail partners (US$ BILLIONS) $164 $465 Global beauty & personal care market $66 $75 $44 $49 $50 $16 ORAL CARE BABY PRODUCTS(1) FRAGRANCE MEN’S GROOMING COLOUR COSMETICS HAIR CARE BODY CARE(2) OTHER PERSONAL CARE MARKETS TARGET MARKETS EXISTING MARKETS Source: Euromonitor International, Beauty and Personal Care 2018 Edition. 1) As per Euromonitor International’s Baby and Child Specific definitions. 2) As per Euromonitor International’s Skin Care and Bath & Shower definitions. MAV Beauty Brands 22
Building a portfolio of iconic brands through M&A Acquire fast-growing independent brands 01 Demonstrated ability to execute and integrate What we look for Entrepreneurial and innovation-driven culture02 Highly attractive to founders • Entry or expansion into adjacent high growth markets • Financial attractiveness (high margins, asset light) Unlock sales potential 03 • Access to new consumer end-markets Cross-sell 100+ • Demonstrated innovation capabilities through global retailers • Revenue and integration synergies operating platform Operational efficiencies and best practices 04 Scale and synergies in supply chain MAV Beauty Brands 23
About MAV Growth Financial Beauty Brands Strategies Overview 01 02 03 03 Financial Overview MAV Beauty Brands 24
Strong historical financial performance (US$ Millions) REVENUE ADJUSTED ADJUSTED EBITDA GROSS PROFIT 17.5% $102.6 12.9% 8.0% CAGR CAGR CAGR CAGR CAGR CAGR $49.5 $28.6 $75.7 $26.3 $41.5 $62.0 $21.0 $34.4 $20.4 $53.8 $30.5 F2015 F2016 F2017 Pro F2018 Pro F2015 F2016 F2017 Pro F2018 Pro F2015 F2016 F2017 Pro F2018 Pro Combined Combined Forma (1) Forma (2) Combined Combined Forma (1) Forma (2) Combined Combined Forma (1) Forma (2) 1) Pro forma for ownership of Renpure as of January 1, 2017 and excludes Cake Beauty. 2) Pro forma for ownership of Renpure as of January 1, 2017 and includes Cake Beauty as of January 23, 2018. MAV Beauty Brands 25
Q4 2018 pro forma financial results (US$ Millions) REVENUE ADJUSTED ADJUSTED ADJUSTED NET INCOME GROSS PROFIT EBITDA NET INCOME +42% +17% 4.7 29.0 13.5 8.6 3.6 11.5 7.4 20.5 1.5 1.1 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Reported Reported MAV Beauty Brands 26
Financial outlook (US$ Millions) REVENUE ADJUSTED EBITDA Key drivers and assumptions (3) • Strategically positioned in fast growing segments that will continue to outperform the broader market 52.5-57.5 145-160 • Grow market share within existing retail partners and distributors by increasing Points of Distribution (SKUs x Doors) 34-37 • Cross-selling: increase number of retail partners and 115-120 distributors who carry more than one of our brands ~29.0 28.6 102.6 • Expand into new international markets 95-100 • Benefit from operating leverage due to past investments in Selling and Administrative • Gross margin percentage to increase steadily in 2019 and 2020 F2018 F2018 F2019 F2020 F2018 F2018 F2019 F2020 Guidance(1) Pro Forma(2) Guidance Target Guidance(1) Pro Forma(2) Guidance Target 1) Pro forma for ownership of Renpure as of January 1, 2017 and excludes Cake Beauty. 3) See Forward-Looking Information in the Company’s MD&A dated March 28, 2019 2) Pro forma for ownership of Renpure as of January 1, 2017 and includes Cake Beauty as of January 23, 2018. 27
Additional financial highlights & market facts Total Debt (Dec 31, 2018) US$113.0 mm Ticker Symbol MAV (TSX) Cash (at Dec 31, 2018) US$5.8 mm 52-week High/Low $14.15 / $7.81 Net Debt (at Dec 31, 2018) US$107.1mm Market Cap(1) ~$330 mm Net Debt/2018PF Adjusted EBITDA(3) 3.7x Shares o/s (Basic)(1) 40.8 mm ANALYST COVERAGE Shares o/s (Fully Diluted)(1)(2) 41.4 mm BMO Capital Markets Insider Ownership ~58% Canaccord Genuity TA Associates 31.2% CIBC World Markets Jefferies Marc Anthony Venere Group 18.2% National Bank Financial Raymond James RBC Capital Markets 1) Assumes conversion of 3,178 proportionate shares to 3,178,000 common shares as of April 1, 2019. 2) Calculated using treasury method. 3) Pro forma for ownership of Renpure as of January 1, 2017 and includes Cake Beauty as of January 23, 2018. MAV Beauty Brands 28
Investment highlights 01 Leader within large and fast-growing categories of a global market 02 Complementary high-growth portfolio of brands 03 Next generation platform drives growth 04 Innovative products that drive consumer demand and retailer traffic 05 Strong financial performance with diverse revenue streams and attractive cash flow characteristics 06 Entrepreneurial founder-led team comprised of world-class industry executives MAV Beauty Brands 29
Appendix MAV Beauty Brands 30
Pro forma Q4 2018 Compared to Pro forma Q4 2017 and Pro forma F2018 Compared to Pro forma F2017 The unaudited pro forma net income and comprehensive income for Q4 2018, F2018, Q4 2017, F2017, reflect the following transactions: • The acquisition by the Company of 100% of the outstanding units of Renpure, LLC on March 8, 2018. • The refinancing of credit facilities concurrent with the closing of the IPO as described. • The completion of the IPO and concurrent changes to the share capital. The pro forma numbers presented by management give effect to the above transactions as if they have been consummated on January 1, 2017. Renpure Was acquired by the Company on March 8, 2018 and therefore the financial results of Renpure have been consolidated with the unaudited financial results Of the Company starting March 8, 2018. Pro forma Pro forma Pro forma Pro forma (in thousands of US dollars) (unaudited) Q4 2018 Q4 2017 Fiscal 2018 Fiscal 2017 Consolidated statements of operations and comprehensive income: Revenue 29,032 20,458 102,629 75,678 Cost of sales (3) 15,581 8,971 53,467 36,889 Gross profit 13,451 11,487 49,162 38,789 Expenses Selling and administrative (1), (4) 7,849 3,869 26,524 17,310 Foreign exchange loss (gain) (423) (33) (554) 154 Amortization and depreciation (2) 787 743 3,135 2,924 Finance and other charges (1) 2,474 1,606 7,946 6,459 10,687 6,185 37,051 26,847 (Loss) income before income taxes 2,764 5,302 12,111 11,942 Income tax expense Deferred (5) 705 1,351 3,089 3,044 705 1,351 3,089 3,044 Net income and comprehensive income for the period 2,059 3,951 9,022 8,898 EBITDA 5,235 7,567 21,782 20,948 Adjusted EBITDA 7,365 8,578 28,622 26,312 Adjusted Net Income 3,646 4,703 14,119 12,894 MAV Beauty Brands 31
Pro forma Q4 2018 Compared to Pro forma Q4 2017 and Pro forma F2018 Compared to Pro forma F2017 Pro forma Pro forma Pro forma Pro forma (in thousands of US dollars) (unaudited) Q4 2018 Q4 2017 Fiscal 2018 Fiscal 2017 Net income and comprehensive income for the period 2,059 3,951 9,022 8,898 Income tax expense 705 1,351 3,089 3,044 Interest 1,684 1,522 6,536 6,082 Amortization and deprecation 787 743 3,135 2,924 EBITDA 5,235 7,567 21,782 20,948 Transaction-related costs (1) 758 424 1,868 740 Non-recurring charges (2) 875 373 2,805 1,547 Purchase accounting adjustments (3) - - 55 2,672 Share-based compensation (4) 1,099 93 2,284 303 Foreign exchange (gain) loss (602) 121 (172) 102 Adjusted EBITDA 7,365 8,578 28,622 26,312 Pro forma Pro forma Pro forma Pro forma (in thousands of US dollars) (unaudited) Q4 2018 Q4 2017 Fiscal 2018 Fiscal 2017 Net income and comprehensive income for the period 2,059 3,951 9,022 8,898 Transaction-related costs 758 424 1,868 740 Non-recurring charges 875 373 2,805 1,547 Purchase accounting adjustments - - 55 2,672 Share-based compensation 1,099 93 2,284 303 Foreign exchange (gain) loss (602) 121 (172) 102 Tax impact of the above adjustments (543) (259) (1,743) (1,368) Adjusted Net Income 3,646 4,703 14,119 12,894 MAV Beauty Brands 32
Pro forma Q4 2018 Compared to Pro forma Q4 2017 and Pro forma F2018 Compared to Pro forma F2017 1. Concurrent with the closing of the IPO, the Company entered into a new $107,500 term loan credit facility and a $20,000 revolving credit facility available. This refinancing resulted in the Company's cost of borrowing reducing to an effective interest rate of approximately 5.15%. The refinancing resulted in a reduction of interest expense of $nil and $742 for pro forma Q4 2018 and Q4 2017 respectively, after considering commitment fees on the unused revolving credit facility and the amortization of the financing costs on the refinanced debt. An additional $nil for pro forma Q4 2018 and $30 for pro forma Q4 2017 has been adjusted for related to transaction costs which are non-recurring in nature and would not reflect the expenses of the combined entity on an ongoing basis. 2. Adjusted for incremental amortization of $170 for proforma Q4 2017 as a result of the fair value adjustment to customer lists in connection with IFRS 3 accounting. 3. In conjunction with the acquisition of Cake Beauty Inc. January 23, 2018 and Renpure, LLC on March 8, 2018, the fair value adjustment of inventory as part of the initial purchase price allocation was amortized. 4. Adjusted for related party commissions of $1,285 and related party salaries and benefits of $29 in Q4 2017 as a result of these expenses being non-recurring in nature and would not reflect expenses of the combined entity on an ongoing basis. 5. Income tax have been reflected at 25.5% of the net adjustments.me tax have been reflected at 25.5% of the net adjustments. MAV Beauty Brands 33
Q4 2018 Compared to Q4 2017 and F2018 Compared to F2017 Reported Reported Reported Reported (in thousands of US dollars) (unaudited) Q4 2018 Q4 2017 Fiscal 2018 Fiscal 2017 Consolidated statements of operations and comprehensive (loss) income: Revenue 29,032 12,164 94,039 42,368 Cost of sales 15,581 4,759 51,222 16,933 Gross profit 13,451 7,405 42,817 25,435 Expenses Selling and administrative 7,849 2,405 26,701 10,878 Foreign exchange loss (gain) (423) (57) (570) 67 Amortization and depreciation 787 573 3,007 2,238 Finance and other charges 2,474 2,348 25,889 9,347 10,687 5,269 55,027 22,530 (Loss) income before income taxes 2,764 2,136 (12,210) 2,905 Income (recovery) tax expense Deferred 1,655 655 (1,808) 889 1,655 655 (1,808) 889 Net (loss) income and comprehensive (loss) income for the period 1,109 1,481 (10,402) 2,016 EBITDA 5,235 4,973 8,227 14,114 Adjusted EBITDA 7,365 5,773 26,200 16,047 Adjusted Net Income 2,696 2,036 2,989 3,357 MAV Beauty Brands 34
Q4 2018 Compared to Q4 2017 and F2018 Compared to F2017 Reported Reported Reported Reported (in thousands of US dollars) (unaudited) Q4 2018 Q4 2017 Fiscal 2018 Fiscal 2017 Net (loss) income and comprehensive (loss) income for the period 1,109 1,481 (10,402) 2,016 Income (recovery) tax expense 1,655 655 (1,808) 889 Interest 1,684 2,264 17,430 8,971 Amortization and deprecation 787 573 3,007 2,238 EBITDA 5,235 4,973 8,227 14,114 Transaction-related costs (1) 758 424 10,723 740 Non-recurring charges (2) 875 185 2,427 874 Purchase accounting adjustments (3) - - 2,727 - Share-based compensation (4) 1,099 93 2,284 303 Foreign exchange (gain) loss (602) 98 (188) 16 Adjusted EBITDA 7,365 5,773 26,200 16,047 (in thousands of US dollars) (unaudited) Q4 2018 Q4 2017 Fiscal 2018 Fiscal 2017 Net (loss) income and comprehensive (loss) income for the period 1,109 1,481 (10,402) 2,016 Transaction-related costs (1) 758 424 10,723 740 Non-recurring charges (2) 875 185 2,427 874 Purchase accounting adjustments (3) - - 2,727 - Share-based compensation (4) 1,099 93 2,284 303 Foreign exchange (gain) loss (602) 98 (188) 16 Tax impact of the above adjustments (543) (245) (4,582) (592) Adjusted Net Income 2,696 2,036 2,989 3,357 MAV Beauty Brands 35
Q4 2018 Compared to Q4 2017 and F2018 Compared to F2017 1. In July 10, 2018 we successfully completed the IPO and our Shares are listed on the Toronto Stock Exchange under the stock symbol "MAV". Comprised of $738 for Q4 2018 related to the fair value remeasurement of the deferred consideration and $20 for costs associated with the 2018 Acquisitions that have been accounted for as finance and other charges. Fiscal 2018, $8,424 of transaction-related costs of the Company have been incurred in connection with the IPO and 2018 Acquisitions, which have been accounted for as finance and other charges and $2,299 of transaction-related costs of the Company incurred in connection with the IPO and the 2018 Acquisitions, which have been accounted for as selling and administrative expenses. 2. Comprised of $875 for Q4 2018 and $2,112 for Fiscal 2018 of non-recurring costs representing predominantly expenses incurred in respect of the following matters: (i) recruiting costs incurred as part of the Company's efforts to put in place additional senior management, (ii) consulting fees in respect of finance support and operations relating to transaction-related matters, (iii) severance costs incurred in respect of certain employees and payments related to the termination of certain consulting contracts on acquisition, (iv) salary and wages related to staff integration to operate one salon, and (v) non-recurring private company board expenses, which have been accounted for as selling and administrative expenses. Fiscal 2018, $315 of non-recurring costs have been incurred by the Company in cost of sales, of which $112 relates to the salon stylist integration and $203 relates to inventory expenses incurred in connection with the integration of the 2018 Acquisitions. 3. In conjunction with the 2018 Acquisitions, the fair value adjustment of inventory as part of the initial purchase price allocation was expensed to cost of sales as the inventories were sold. 4. Represents recognition of share-based payments, which have been accounted for as selling and administrative expenses. MAV Beauty Brands 36
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